Two buildings preserved from the Macquarie era, both at the southern end

Macquarie Street is named after Lachlan Macquarie, an early Governor of New South Wales (in office 1810–1821).[1] In the years since its founding in 1788, Sydney had developed organically, and by the early 1800s was lacking in major public buildings, and had a complex network of narrow streets. The supply of drinking water and waste management was also becoming an issue. Macqaurie initiated the construction of Sydney's first public buildings of any real permanence and set the boundaries of Sydney's grid of streets. With Circular Quay as the focus of this new civic scheme, Macquarie Street marked its eastern boundary and was designed as a ceremonial thoroughfare. The public buildings distributed either side of the street would both delineate and connect the civil and commercial town centre to its west with the green spaces (now the Domain and Royal Botanic Gardens) to the east.

Among the public buildings commissioned by Macquarie, Hyde Park Barracks and St James' Church are two examples largely preserved unchanged since that era. The two buildings face each other across Queen's Square, at the southern end of Macquarie Street.

Upon laying out the street in 1810, Governor Macquarie also carved out land from the Domain for the building of Sydney Hospital, with its frontage on Macquarie Street. Due to the reluctance of the British government to provide funding, the building contract for the hospital provided for the government to provide convict labour, and for part of the project costs to be paid in the form of rum import monopolies, leading to the name the "Rum Hospital". The hospital buildings were completed in 1816. Although called "elegant and commodious" by some commentators, architect Francis Greenway criticised both the design and construction.[2] As the only major hospital in the colony at the time, the hospital took up almost the entire eastern frontage of the southern half of Macquarie Street. However, the hospital's capacity exceeded the needs of Sydney at the time, and almost from the start space in its two wing buildings began to be occupied by various government institutions. The northern wing building was occupied by the Legislative Council and Executive Council, and was eventually expanded to become the Parliament House for New South Wales. The southern wing building became the Sydney Mint, among other functions.

The northern section of Macquarie Street was initially a path through the Governor's Domain leading to Bennelong Point. After Government House was moved further up the hill, the path was widened and became part of Macquarie Street, leading to land to the west of the street being sold off for commercial development in the 1840s and 50s. Today, this northern section runs along the eastern side of Circular Quay. To the east is the Royal Botanic Gardens, while to the west, steps led down to the quay. These include the sandstone Moore Stairs built in 1868 (now located at 61 Macquarie Street), an important historic feature.[3] In the past, this area was lined by warehouses and other shipping-related facilities focusing on the wool trade, leading to this section being called the "wool stores" end. At the end of the street was Bennelong Point. From 1821 this was the site of Fort Macquarie, which in 1901 was demolished to make way for the Fort Macquarie Tram Depot, which in turn was demolished in 1958 to make way for the Sydney Opera House.

The warehouses and wharf facilities near the Opera House were progressively removed in the mid-20th century and replaced by modernist office blocks, but in 1998 a complex of contemporary buildings were built here, including the Bennelong Apartments, nicknamed "the Toaster". This complex was criticised for incongruity with the surrounding area, disturbing sightlines and mediocre design. "Arguably the most universally disliked development in decades",[4][5][6] it also includes offices, restaurants, a hotel and cinema.

Because of the proliferation of medical chambers and surgeries, and the presence of a number of medical professional institutions, Macquarie Street was widely known as the Harley Street of Sydney from the late 19th century until recent decades. The Royal Australian College of Physicians Building[7] at 145 Macquarie Street was the Georgian residence of John Fairfax until 1848. The British Medical Association's 1920s BMA House[8] at 135-137 Macquarie St still houses medical chambers and lecture hall.

Macquarie Street is also the location of Sydney Hospital, the Hyde Park Barracks and St. James' Church, which were all Macquarie projects. The historic Sydney Mint building, along with the entrance building to Parliament House, are remnants of the original Sydney Hospital still preserved in recognisable form.